IP theft – the $200bn problem | 17 February 09

BUSINESSES battling in the current challenging economic climate are being warned not to ignore a $200bn problem.

Intellectual property (IP) theft has become a major global issue as developments in technology and communications fuel counterfeiting and piracy to the tune of $200bn a year.

IP crime costs the UK economy alone £1.3bn a year with £900m of this flowing to organised crime.

While major corporations and world-renowned brands are the most high-profile victims of the illegal trade, IP experts at North law firm Ward Hadaway warn that businesses of all kinds can get caught out by the counterfeiters.

Alex Shiel, partner and head of intellectual property at Ward Hadaway, said: “When people think of fake goods and counterfeiting, they tend to think it just applies to copies of designer goods, but the reality is that counterfeiting and other forms of IP theft affect all sectors at all levels.

“With more business being done online and the proliferation of auction websites such as ebay, the scope for counterfeiting has grown enormously.

“Recent research has found that nearly a quarter of all small and medium-sized enterprises have been affected by counterfeiting yet 40% of businesses are doing nothing to protect their intellectual property.”

As well as diverting sales away from the rightful owners of the counterfeited goods and services, IP crime can cause serious damage to a company’s reputation.

Alex Shiel explained: “Fake goods are invariably poor quality imitations of the real thing so if a consumer buys a counterfeit, they are likely to be seriously disappointed with what they get and are unlikely to buy more goods from the same brand.

“With this in mind, companies would be very wise to invest in expertise and business systems to protect their intellectual property and their brands.

"It is also good practice to ensure your goods are only sold via authorised dealers and traders so you can control the way that brands are used in the market place.”

However, IP crime is not just a problem when it comes to selling to the customer - the spread of IP crime has also meant that counterfeits have found their way into companies’ supply chains.

Businesses which source goods from a number of different suppliers are particularly vulnerable unless effective systems and agreements are put in place to tackle this problem.

Alex Shiel said: “Since counterfeiting has become much more sophisticated, it is harder to detect fakes and stop them getting into the supply chain.

“Once in, they can seriously compromise the quality of goods and services a company sells and, by extension, can seriously harm that company’s reputation.

“Again, getting expert advice and putting in rigorous business systems can cut down on fakes in the supply chain.”

Acknowledging the scale of the problem, the Trading Standards Institute has put together a tool kit for businesses to help them deal with IP theft.

The tool kit can be downloaded by going to www.ipo.gov.uk/ipctoolkit.pdf